CBSN

Pitt Wants Webster Pick Probed

Harvey Pitt headshot, as US Securities and Exchange Commission chairman, 1-23-02
AP
Securities and Exchange Commission Chairman Harvey Pitt asked Thursday for an investigation of William Webster's selection to head an accounting oversight board after the disclosure that Pitt concealed information about Webster from SEC commissioners.

Commission spokeswoman Christi Harlan said the agency's inspector general, Walter Stachnik, would conduct the internal investigation, calling it "the normal route" for such inquiries. "This is simply a look at the process and it is not a review of Judge Webster," she said.

Harlan confirmed the request for the IG investigation in the wake of a revelation that Pitt had failed to tell other commission members — in advance of last Friday's SEC vote — that Webster had headed an auditing committee of a company facing fraud charges.

A sharply divided SEC approved Webster's appointment that day. The two Democrats on the commission had supported another candidate whom they believed would advocate tough regulation of the accounting industry.

In an interview with The New York Times, Webster said he told Pitt and Robert K. Herdman, the SEC's chief accountant, days before the vote that he had headed the auditing committee for U.S. Technologies, a company facing lawsuits by investors alleging fraud.

"I told them that people are making accusations," Webster told the newspaper. "I said if this is a problem, then maybe we shouldn't go forward."

He said he was assured by Pitt that SEC staff had looked into the issue and that it would not pose a problem.

U.S. Technologies' former accounting firm, other members of the auditing committee, company executives and investors told the Times they were never contacted by anyone at the commission about Webster's appointment.

The SEC auditing oversight board was created by legislation inspired by accounting scandals that led to the financial debacle at Enron, WorldCom, Global Crossing and other large companies. It was designed to supervise and discipline the accounting industry.

Webster, a former director of the CIA and FBI and former federal judge, was selected by a 3-2 vote to head the oversight board. Pitt was Webster's leading advocate on the commission and had come under fire for playing politics with the decision.

"I am fiercely independent. I am beholden to no one," Pitt said in an emotional address to the commissioners last Friday, when he pushing Webster's selection. He said no one from the accounting profession, the Republican Party or the Bush administration had sought to influence his decision.

Democrats on the committee had backed John H Biggs, a pension fund administrator, for the job.

After the vote, Senate Banking Committee Chairman Paul Sarbanes, D-Md., had called on Pitt to resign.

Pitt has come under fire for his ties to the accounting industry at a time that the SEC has been heavily involved in the investigation of large-scale accounting fraud at big corporations. Before joining the commission, he represented Wall Street's big players and all Big Five accounting firms as a private security lawyer.

The White House has remained steadfast in its support of Pitt.